Today the Reserve Bank has left interest rates on hold, with no change to the Official Cash Rate at 2.25%.
Although many economists predicted a rate cut in recent weeks, forecasts had changed to anticipating a lack of action, with the domestic economy appearing solid and global economic outlook improving.
Reserve Bank Governor Graeme Wheeler said in a statement that global market volatility has settled down, and the outlook for global growth is more stable after being revised down over successive quarters.
However, Mr Wheeler also sounded a note of caution. “House price inflation in Auckland and other regions is adding to financial stability concerns,” he said.
“Auckland house prices in particular are at very high levels, and additional housing supply is needed.
“There continue to be many uncertainties around the outlook. Internationally, these relate to the prospects for global growth and commodity prices, the outlook for global financial markets, and political risks. Domestically, the main uncertainties relate to inflation expectations, the possibility of continued high net immigration, and pressures in the housing market.”
The dairy sector also continues to be of further concern with export prices below break-even levels for most farmers.
The RBNZ will have its next full monetary policy statement review in August.